Correlation Between IShares China and JP Morgan

Can any of the company-specific risk be diversified away by investing in both IShares China and JP Morgan at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining IShares China and JP Morgan into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between iShares China Large Cap and JP Morgan Exchange Traded, you can compare the effects of market volatilities on IShares China and JP Morgan and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in IShares China with a short position of JP Morgan. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares China and JP Morgan.

Diversification Opportunities for IShares China and JP Morgan

0.98

Correlation Coefficient

IShares China  JP Morgan

Almost no diversification

The 3 months correlation between IShares and JCHI is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding iShares China Large Cap and JP Morgan Exchange Traded in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JP Morgan Exchange and IShares China is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on iShares China Large Cap are associated (or correlated) with JP Morgan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JP Morgan Exchange has no effect on the direction of IShares China i.e., IShares China and JP Morgan go up and down completely randomly.

Pair Corralation between IShares China and JP Morgan

Considering the 90-day investment horizon iShares China Large Cap is expected to generate 0.97 times more return on investment than JP Morgan. However, iShares China Large Cap is 1.03 times less risky than JP Morgan. It trades about 0.09 of its potential returns per unit of risk. JP Morgan Exchange Traded is currently generating about 0.06 per unit of risk. If you would invest  2,646  in iShares China Large Cap on August 30, 2024 and sell it today you would earn a total of  385.00  from holding iShares China Large Cap or generate 14.55% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	100.0%
Values	Daily Returns

iShares China Large Cap  vs.  JP Morgan Exchange Traded

iShares China Large

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in iShares China Large Cap are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak basic indicators, IShares China demonstrated solid returns over the last few months and may actually be approaching a breakup point.

JP Morgan Exchange

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in JP Morgan Exchange Traded are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak technical indicators, JP Morgan may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with IShares China and JP Morgan

The main advantage of trading using opposite IShares China and JP Morgan positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares China position performs unexpectedly, JP Morgan can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in JP Morgan will offset losses from the drop in JP Morgan's long position.

The idea behind iShares China Large Cap and JP Morgan Exchange Traded pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.